Tribune Co. calls buyback a success

Media giant expects to repurchase 45 million shares, 8 million fewer than authorized

Despite raucous boardroom dissent, Tribune Co. said yesterday that it successfully completed its tender offer and expects to buy 45 million of its shares at $32.50 apiece, the top price set by the company.

The Chicago media company plans to follow up with the purchase of 10 million shares on July 12 from the McCormick Tribune Foundation - controlled by Tribune management - at the same $32.50 price.

Tribune also said it would buy another 20 million shares in the open market beginning July 12 or later, bringing the total repurchase to 75 million shares, or 25 percent, of its 300 million shares outstanding.

"We are pleased with the successful conclusion of the tender offer," Tribune chief executive Dennis J. FitzSimons said in a statement. "Now, our priority is to improve operating performance through a combination of top-line growth initiatives and additional cost savings. We'll also continue to move forward on dispositions of non-core assets."

Tribune owns the Los Angeles Times, Chicago Tribune, The Sun, Newsday in New York and seven other newspapers. It also owns two dozen TV stations, including KTLA-TV Channel 5 in Los Angeles, and the Chicago Cubs baseball team.

The company had previously announced plans to cut $200 million in additional costs over the next two years. Those savings are expected to come through back-office efficiencies such as centralized accounting systems, the sharing of news-gathering resources among its newspapers and TV stations, and through employee attrition and layoffs.

Tribune recently announced the sale of its TV stations in Atlanta and Albany, N.Y., both considered to be "non-core" holdings.

The buyback is the first step in Tribune management's plan to boost the company's lagging share price. Traders seemed to give the results a thumbs-up yesterday; Tribune's shares gained $1.57, or 5 percent, to close at $32.47.

Tribune's stock repurchase had run into stiff opposition from California's Chandler family, which holds nearly 37 million shares and three of the 11 board seats through several trusts.

The Chandlers went public two weeks ago with a stinging critique of Tribune's management, calling for the company to spin off its broadcast properties or sell itself outright.

The buyback allows the Chandlers to vault ahead of the McCormick Tribune Foundation as the company's largest shareholder. In a statement yesterday, the Chandlers said they would continue to push their agenda.

"We, like many other non-tendering stockholders, believe there is greater value to be realized through prompt and meaningful strategic action," the statement said. "As the largest stockholder in Tribune with approximately 14.3 percent of the outstanding shares in the company, we will continue our efforts to bring about positive change for the benefit of all Tribune stockholders."

Spokesman Steve Silva said the 14.3 percent figure refers to the Chandlers' stake after completing the buyback of 45 million shares through the tender offer and 10 million from the foundation. If the Chandlers do not sell while Tribune buys the additional 20 million shares in the open market, their ownership stake will reach a little over 16 percent.

The 45 million shares that were tendered, or pledged, to Tribune during the four-week offer period fell 8 million short of the 53-million-share maximum that the company had offered to buy, but experts took that as a bullish sign. Many shareholders, they said, apparently didn't want to exit at $32.50 because they thought the stock price might keep rising..

"The market likes what it sees so far," said analyst John Miller of Chicago-based Ariel capital, which has fattened its Tribune position in recent months and now owns slightly more than 5 percent of the stock.

Ariel publicly supported the buyback but declined to participate because it believes the shares have an "intrinsic value" of $44 to $45 apiece, Miller said.

The news may be less welcome for Tribune bondholders. Moody's credit-rating agency downgraded Tribune shares on June 15 to "junk" status, noting the $2 billion in additional debt the company would incur to finance the stock buyback.

Since the buyback captured 8 million fewer shares than authorized, the company will buy that many more in the open market. If forced to pay a higher price, the amount of debt incurred would likely rise.